SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16993 \ May 9, 2001
SECURITIES AND EXCHANGE COMMISSION V. MARKET TRADERS LLC AND ARCANGELO CAPOZZOLO, C.A. No. 01-CV-10788 (DPW)
SEC CHARGES OPERATOR OF STOCK-PICKING WEBSITE WITH SECURITIES FRAUD
The Securities and Exchange Commission ("Commission") today announced the filing and settlement of civil fraud charges against Arcangelo Capozzolo ("Capozzolo"), the operator of an Internet website that provides stock recommendations, and Capozzolo's company, Market Traders LLC ("Market Traders"). The Commission alleges that Capozzolo, a resident of Williamsville, New York, and Market Traders violated the antifraud provisions of the federal securities laws by making false and misleading statements on Market Traders' website and in bulk email messages to potential subscribers. Capozzolo and Market Traders have agreed, without admitting or denying the Commission's allegations, to the entry of a permanent injunction and to the imposition of a civil penalty against Market Traders.
The Commission's complaint alleges that Capozzolo and Market Traders operate an Internet website that provides stock picks for short-term traders in return for a subscription fee. During the period from October 1999 to at least May 2000, Market Traders and Capozzolo claimed that Market Traders' proprietary trading system had, over a ten year period, compiled a 90% accuracy rate in predicting a rise in a stock's price and had made millions of dollars. According to the complaint, however, Market Traders' system has not been in existence for ten years and has not made millions of dollars. Moreover, Market Traders' claim of 90% accuracy in predicting the rise in a stock's price was based on hypothetical "paper trades." The complaint also alleges that Market Traders falsely claimed that it purchased the stocks it recommended and that its system could track institutional investors' stock purchases when, in fact, it never made any actual trades and could not track institutional investors' stock purchases.
The complaint further alleges that Capozzolo and Market Traders falsely claimed that Market Traders' head trader, John C. Kuja ("Kuja"), was up 832% with no losses. According to the complaint, these purported results were based on miscalculated, hypothetical trades, and only included a portion of Kuja's stock picks.
The complaint alleges that Capozzolo's and Market Traders' conduct violated Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder. Without admitting or denying the Commission's charges, Capozzolo and Market Traders consented to the entry of a final judgment permanently enjoining them from future violations of those provisions and imposing a civil monetary penalty against Market Traders in the amount of $25,000.